Investing in Europe: Diversification and Currency Issues in Cross-Border Real Estate Investment for UK Investors

Nick Tyrrell and Jesse Bostwick

ERES from European Real Estate Society (ERES)

Abstract: This paper looks at the optimal holding of European real estate for a UK institutional investor. It starts by making a set of assumptions about risk, correlations, and expected returns for UK and continental European real estate based on a combination of historical analysis and projection. Using these inputs, we compute risks, returns and Sharpe ratios for a range of blends of UK and non-UK exposure under a number of exchange rate assumptions. Although the case for investing in Europe is unclear when exchange rates are ignored, adding currencies produces quite different results. Whether hedged or unhedged, it is shown that under a conservative set of assumptions an investor could substantially improve their risk-adjusted return by taking significant exposure to continental Europe. The results also suggest that partial, rather than full, hedging of currency risk is likely to be the most efficient strategy. This material has been previously published as a white paper by JPMorgan Asset Management.

JEL-codes: R3 (search for similar items in EconPapers)
Date: 2007-01-01
References: Add references at CitEc
Citations:

Downloads: (external link)
https://eres.architexturez.net/doc/oai-eres-id-eres2007-183 (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:arz:wpaper:eres2007_183

Access Statistics for this paper

More papers in ERES from European Real Estate Society (ERES) Contact information at EDIRC.
Bibliographic data for series maintained by Architexturez Imprints ().